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Who can apply for the grant?

On 26 March 2020 the Chancellor Rishi Sunak unveiled the Governments long awaited emergency package to support 5 million self-employed workers throughout Britain.

The scheme will be available to self-employed individuals or members of business partnerships. To apply you must have:

  • submitted a Self-assessment tax return for 2018/19
  • Traded in the 2019/20 tax year
  • Trading at the time of application
  • Intend to trade in the 2020/21 tax year
  • Have lost profits as a result of COVID-19

You can continue to trade, subject to the Government guidelines in respect of social distancing measures. However, the scheme is directed at support for those who have lost income as a result of the crisis. Some businesses, dependent upon their sector, may find that their business increases as a result and this may need to be considered.

To qualify for the scheme your self-employed trading profits must be less than £50,000 with more than half your income being from self-employment.

What will be available and when

It was announced that the self-employed will receive up to a maximum of £2,500 per month in grants for at least 3 months. Grants will be available from June 2020 and is in line with the Coronavirus Job Retention Scheme.

Those eligible will receive a cash grant worth 80% of their average monthly trading profit over the last three years. The average will be based upon 2016/17, 2017/18 and 2018/19 tax years.

HMRC will add together the total trading profit for the 3 years to calculate an average monthly profit. This will be used for the basis of the 80% claim.

If an individual has less than 3 years trading profits, the payment will be averaged over the period they have been self-employed and trading.

The grant received will be included in your total taxable trading income and will need to be included in any claim for tax credits.

The self-employed have until 23 April 2020 to file late tax returns for 2018/19, which were due by 31 January 2020.

There has been no provision made for those individuals who commenced self-employment after 6 April 2019. The reason for this decision is that there is no evidence to support the level of earnings to date.

Many self-employed people who are eligible for the new scheme will be able to apply directly to HMRC for the taxable grant. HMRC will contact eligible individuals directly. It is believed individuals will need to complete an online form, with the grant being paid directly into individual bank accounts.

The income support scheme will cover the three months to May. Grants will be paid in a single lump sum instalment covering all 3 months and will start to be paid at the beginning of June.

Self-employed individuals are already benefitting from a series of measures announced by the Chancellor to boost household incomes and will be able to access these while the new scheme is being rolled out. These measures include the deferral of VAT payments and personal income tax payments due for payment in July 2020.

At present, the main concern is in relation to what is deemed ‘Trading profit’. Is this the profit per the trading accounts produced, or the taxable profit reported on individual income tax returns submitted. We are awaiting further guidance on this point.

The future

During his announcement the Chancellor confirmed that the grant was in fact in line with support being given to the employed. It is therefore anticipated that when ‘normality returns’ we may see an equalisation in the amount of national insurance contributions paid between the self-employed and employed.